Special Report: North Dakotas Humbling Comedown

[Smokin Joe]

How many lifetimes of energy do you wish to have available?  1, 10 100?


During my now 43 years in industry, I have seen the variances of 'Assessments' of resources, seen new technology that has been developed and utilized, and am convinced we ain't seen nothing yet.  I recall when I was first out of school in the '70s that we were expected to run out of oil in 10 years.

It did not happen, and the production since that time has greatly exceeded the reserves supposed to exist then, and we have higher production and higher reserves than ever at present.

I worked unconventionals for the past 10 years and seen almost all the resource potential basins in North America.

We have a staggering amount of hydrocarbons that are available for development.  This holds true particularly for natural gas.  True, price dictates a lot, but that will come back around and the hydrocarbons will in fact be developed and produced.

The Bakken play didn't really boom in North Dakota until the USGS finally came out with yet another upgraded (and significantly increased) estimation of oil in place, in about 2006. By that time, there had been the quiet boom in Richland County, MT, in the Elm Coulee field, going since 2000. Wells there were estimated to have a recoverable 3-5% of oil in place, but when that production passed 10% of estimated oil in place (and kept going), someone had to redo their numbers, and the numbers are constantly being revised upward. That is just one of the unconventional resources which are all over the US.

This doesn't even factor in the offshore potential in the Eastern seaboard of the US, the Western Continental Margin, and the Gulf of Mexico, which is still full of surprises--and tremendous numbers of natural oil seeps which indicate reservoirs waiting to be tapped. 
Traditionally, two things have been in the way of development: economics and technology, but now we can add the third of rabid environmental politics, primarily a device not to protect anything but the projection of power of a few who would control entire nations using some critter as an excuse.

The oil doesn't care about politics, it doesn't give a rat's ass about snail darters--and entombed hundreds of animals in the tar pits at La Brea. It doesn't care how much you are willing to spend for it, or how or even whether it is extracted. It just is, and there is a lot of it. The only question is one of having the incentive to do so. In some places that is determined by politics, here--and to some extent there too--by economics.

We are perhaps still the most capable nation on the planet. We have the ability, the innovation, the intelligence to do almost anything we want. But we will not do it if we don't have the Will to do so. If we are content to be enslaved by people pushing an agenda out of self-importance, do-gooderism, or the desire to hobble this nation with the chains of unnecessary regulation, then we will wear those chains, we will be far less than we could be, and we will eventually be conquered from within and without for our lack of desire to prevail.


 

[truth_seeker]

I am a reserves engineer who has also been in exploration for more years than I wish to remember.

As a finance type working with reservoir engineers and geologists in the 1970s, they taught me the amount of "economically recoverable reserves" were determined by the hydrocarbons actually in the ground, the technology, the product price, the drilling and operating costs etc.



 

[Smokin Joe]

As a finance type working with reservoir engineers and geologists in the 1970s, they taught me the amount of "economically recoverable reserves" were determined by the hydrocarbons actually in the ground, the technology, the product price, the drilling and operating costs etc.

Yep. Since then there is a regulatory burden as well, especially on Federal Leases.

[truth_seeker]

Yep. Since then there is a regulatory burden as well, especially on Federal Leases.

I remember state and city fees.

Ad valorem, royalty, fees, licenses, minority interests etc. Our oil field was on State Of California offshore, mainly. Still in production today.

Directionally drilling new wells in a formation that was depleted from "primary" production, to inject water and perform secondary recovery. Also to workover existing production wells, with what would now be called "fracking" but then was called (pressure) washing.

Also some steam injection. Overall fairly leading edge technology for the time. I think California produced about 1 million Bbl./day. Hq. of Occidental, Arco, Signal, Union were in Lost Angeles, Chevron in San Francisco.

I believe only Texas produced more oil then. 

[IsailedawayfromFR]

As a finance type working with reservoir engineers and geologists in the 1970s, they taught me the amount of "economically recoverable reserves" were determined by the hydrocarbons actually in the ground, the technology, the product price, the drilling and operating costs etc.

As a reserves engineer, I can appreciate your definition of reserves, which are by SEC the economically recoverable amount of oil and gas that is proved.

There is many times that amount of non-proved reserves that have been estimated, and many times that amount of non-reserves (called resources) as well.

As an exploration economist, all of these volumes were risked and were made part of the way we evaluate the drilling of a wildcat.  That is the reason why the proved reserves of the 70s have been exhausted and replaced many times over by new reserves.

[IsailedawayfromFR]

The Bakken play didn't really boom in North Dakota until the USGS finally came out with yet another upgraded (and significantly increased) estimation of oil in place, in about 2006. By that time, there had been the quiet boom in Richland County, MT, in the Elm Coulee field, going since 2000. Wells there were estimated to have a recoverable 3-5% of oil in place, but when that production passed 10% of estimated oil in place (and kept going), someone had to redo their numbers, and the numbers are constantly being revised upward. That is just one of the unconventional resources which are all over the US.

This doesn't even factor in the offshore potential in the Eastern seaboard of the US, the Western Continental Margin, and the Gulf of Mexico, which is still full of surprises--and tremendous numbers of natural oil seeps which indicate reservoirs waiting to be tapped. 
Traditionally, two things have been in the way of development: economics and technology, but now we can add the third of rabid environmental politics, primarily a device not to protect anything but the projection of power of a few who would control entire nations using some critter as an excuse.

The oil doesn't care about politics, it doesn't give a rat's ass about snail darters--and entombed hundreds of animals in the tar pits at La Brea. It doesn't care how much you are willing to spend for it, or how or even whether it is extracted. It just is, and there is a lot of it. The only question is one of having the incentive to do so. In some places that is determined by politics, here--and to some extent there too--by economics.

We are perhaps still the most capable nation on the planet. We have the ability, the innovation, the intelligence to do almost anything we want. But we will not do it if we don't have the Will to do so. If we are content to be enslaved by people pushing an agenda out of self-importance, do-gooderism, or the desire to hobble this nation with the chains of unnecessary regulation, then we will wear those chains, we will be far less than we could be, and we will eventually be conquered from within and without for our lack of desire to prevail.

I believe the person I was answering in my earlier post was not even a geologist, although the claim was out there.  If he/she was, they apparently have some difficulty understanding the oil and gas industry.  Have you run across Suppressed before?

[truth_seeker]

As a reserves engineer, I can appreciate your definition of reserves, which are by SEC the economically recoverable amount of oil and gas that is proved.

There is many times that amount of non-proved reserves that have been estimated, and many times that amount of non-reserves (called resources) as well.

As an exploration economist, all of these volumes were risked and were made part of the way we evaluate the drilling of a wildcat.  That is the reason why the proved reserves of the 70s have been exhausted and replaced many times over by new reserves.

I recall an issue of Time or similar, which stated that Alberta Province alone had more hydrocarbon reserves, than Saudi Arabia.

Alberta today produces quite a lot, from heavy oil/tar sands--correct? Various recovery/processing technologies in use.

I also seem to recall our resouces in Colorado/Wyoming/Utah are very large. 

[Smokin Joe]

I remember state and city fees.

Ad valorem, royalty, fees, licenses, minority interests etc. Our oil field was on State Of California offshore, mainly. Still in production today.

Directionally drilling new wells in a formation that was depleted from "primary" production, to inject water and perform secondary recovery. Also to workover existing production wells, with what would now be called "fracking" but then was called (pressure) washing.

Also some steam injection. Overall fairly leading edge technology for the time. I think California produced about 1 million Bbl./day. Hq. of Occidental, Arco, Signal, Union were in Lost Angeles, Chevron in San Francisco.

I believe only Texas produced more oil then.

Fees, licenses, reclamation bonds, royalties, extraction taxes, lease costs are all pretty much factored in.

Regulatory burdens are different. Recall, the EPA, and to remain relevant they have cranked up the standards for just about everything. Add in the USFWS, the BLM, even the BIA, and it gets crazy.

In order to get the permit to build a location road (my work has all been onshore), you have to have a third party conduct surveys for endangered plants, endangered critters, conduct surveys for raptors (Eagles and other birds of prey) nesting sites, survey for prehistorical archaeological sites (cultural remains), historical sites, paleontological resources, and conduct an Environmental Impact Statement, just to get warmed up on the paperwork.

Don't let anything leak on the ground (including you), or the remediation cost is unreal, and fines steep.

The old days of drilling an outhouse hole and setting the shack over it are long gone, all greywater is hauled out. Reserve pits are no longer in use, everything is closed system, which requires elaborate solids control to remove cuttings and fine solids from drilling mud. Just for a couple of conspicuous changes. There are many more, which I won't take time to list, but they all have increased the cost of drilling a well.   

[Smokin Joe]

I believe the person I was answering in my earlier post was not even a geologist, although the claim was out there.  If he/she was, they apparently have some difficulty understanding the oil and gas industry.  Have you run across Suppressed before?

Nope. (courtesy ping @Suppressed)
There are, however, many types of geologists. Some of us have spent decades in the oil industry (since 1979), on drilling locations, examining samples, evaluating mud gas and other data, picking packer points, core points, and for the last 25 years, geosteering horizontal wells (since 1990, doing laterals, for me).

Others have been in offices working up the theoretical justification for what we do, selling prospects to the management.

Then there are many geologists who have little or nothing to do with the oil industry professionally, but have embraced a different specialization. .

I can't speak to the education of the individual involved, and do not know their CV, so I can't say they aren't a geologist because they may or may not seem to be intimately knowledgeable about one small part of the spectrum of geological specializations out there.

[IsailedawayfromFR]

Don't let anything leak on the ground (including you), or the remediation cost is unreal, and fines steep.   

Unless you are the EPA and you wish to enter a gold mine and pollute a river in multiple states, taking away drinking water for an extended period.

Then as an EPA bureaucrat you get a bonus or get promoted as your reward for that job.

To date, have you seen anybody even reprimanded on this spill?  If it was a private party instead of the EPA, they would already be serving serious time in jail.

[IsailedawayfromFR]

I recall an issue of Time or similar, which stated that Alberta Province alone had more hydrocarbon reserves, than Saudi Arabia.

Alberta today produces quite a lot, from heavy oil/tar sands--correct? Various recovery/processing technologies in use.

I also seem to recall our resouces in Colorado/Wyoming/Utah are very large.

Yes, the Athabasca Oil sands are very large.  The bitumen in place in Alberta and Saskatchawen is estimated at 2.2 trillion barrels.  Not all of that is recoverable, of course and the percent that is recoverable is the subject of discussion.  Even if only 10% to 15% was recovered, that would equal the current estimate of proved reserves for Saudi Arabia.

Just remember that economics come into play here, as all oil does not have the same value per barrel.

Those of Saudi Arabia are mostly higher quality and are extremely cheap to produce, while mining or otherwise producing the Oil Sands has some of the poorest quality hyrdocarbons at highest cost of anywhere in the world.

[truth_seeker]

Back in the late 70s/early 80s Synfuels Boom era, I recall a previous GOP Colorado Governor (Love) making the point his state has weathered many previous booms;

Silver, gold, uranium, oil/gas a few times etc. Ghost towns scattered across the West.

[IsailedawayfromFR]

Back in the late 70s/early 80s Synfuels Boom era, I recall a previous GOP Colorado Governor (Love) making the point his state has weathered many previous booms;

Silver, gold, uranium, oil/gas a few times etc. Ghost towns scattered across the West.

that 'Synfuels Boom era' was not a boom at all, but a synthetic bubble caused by government subsidies and wishful thinking.  Similar to what is happening right now on solar, wind and biofuels.  They will all sink as market forces weigh in and taxpayers wonder what happened to all the money they ponied up.

What recently happened in the oil and gas industry with exploitation of unconventionals is a real boom.  The technology has been proven, and prices will return and the activity level enhanced.

We are living in the Golden Age of the industry.  And we ain't seen nothing yet.

[Bigun]

that 'Synfuels Boom era' was not a boom at all, but a synthetic bubble caused by government subsidies and wishful thinking.  Similar to what is happening right now on solar, wind and biofuels.  They will all sink as market forces weigh in and taxpayers wonder what happened to all the money they ponied up.

Exactly right!  And a good deal of the money ponied up magically finds it's way back into the politicians campaign coffers if not their personal pockets!

[Smokin Joe]

Unless you are the EPA and you wish to enter a gold mine and pollute a river in multiple states, taking away drinking water for an extended period.

Then as an EPA bureaucrat you get a bonus or get promoted as your reward for that job.

To date, have you seen anybody even reprimanded on this spill?  If it was a private party instead of the EPA, they would already be serving serious time in jail.

Not on the Gold King Mine spill, if that is what you are referring to.

I have known an oil company to be fined $15,000 for a greywater tank (sited in a pit) which overflowed (liquid only, no solids). That, however, is another story.